GBP/USD struggling to hold above 1.3315 after retreating from 1.3400

Sterling’s reversal from 1.3400 area, its highest level since early September, has been contained at 1.3265, and the pair is attempting to consolidate  |  23/11/2020 20:23

• GBP/USD rejected at 1.3400, dives to session lows below 1.3300.
• The pound struggles to hold at multi-month highs as the US dollar picks up.
• GBP/USD may challenge 1.3482 – CitiBank.

Sterling’s reversal from 1.3400 area, its highest level since early September, has been contained at 1.3265, and the pair is attempting to consolidate at multi-month highs past 1.3315.

Brexit hopes and COVID-19 vaccine support the GBP

The pound accelerated its uptrend from mid-November lows at 1.3100 on Monday’s early trade, breaking through November’s peak at 1.3315. The promising results of the trials of AstraZeneca’s COVID-19 vaccine and renewed hopes of a Brexit deal with the EU have fuelled pound's demand during the London trading session.

The upbeat UK Flash PMIs, which advanced a shorter than expected contraction in November, and a weak USD, weighed by hopes od further monetary easing by the Federal Reserve, have contributed to extend pound’s bullish momentum

The rally, however, was halted right above 1.3400 and the pair plunged beyond 100 pips during the US trading session, amid a strong dollar recovery. The upbeat preliminary US PMI figures, anticipating a better-than-expected performance of the manufacturing and the services sectors in November have increased confidence in the US economy, boosting demand for the USD.

GBP/USD may challenge 1.3482 – CitiBank

From a wider perspective, The FX analysis team at CitiBank remains optimistic about the mid-term outlook for the pound, pointing out to the 1.3482 target: “Going forward, widespread distribution of a vaccine, and an agreement on a Brexit deal can support GBP. Global economic recovery in 2021 as a result of a vaccine could see the UK begin to catchup. This also reduces the probability of the MPC moving policy rates into negative territory (…) GBPUSD found support at 100dMA. The pair may challenge 1.3482, with support at 1.2982.”

Technical levels to watch